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Purchasing an unfinished home can be a terrific way to obtain a prime piece of property already equipped with an existing structure, approved building permits and a blank canvas for your design dreams all at a low cost.

Unfortunately, buying unfinished homes also comes with risks. To learn about the pitfalls and benefits of purchasing unfinished homes, keep reading for tips and tricks that can help you with your next purchase.

1. Check the Permits

If an unfinished home comes with existing planning and building permits, it is strongly recommended that you have these evaluated by a certified planner and an experienced real estate lawyer to ensure all requirements are met.

Remember, the home may be unfinished because the current owners were unable to obtain proper planning permission or perhaps proceeded without permission and were shut down. If you suspect your potential dream home investment could come with a series of permit headaches, plan ahead and check the permits and building codes for your area.

2. Know Your Limitations

If the unfinished home you're planning to buy is only a one story house, but you have big dreams of building an addition or second story, you may want to check your permit limitations. Depending on the site's zoning, the area's building laws, neighborhood covenants and neighbor approval, your dream project could be stopped dead in its track.

Every county and town is different, so know your enforceable restrictions and plan ahead before you buy.

3. Have the Building Inspected

If you plan to finish the existing construction on the home and stay true to the originally drawn plan, you would be still advised to have the current building fully inspected by a certified residential home inspector.

Anything from shoddy workmanship to poorly designed plans could be a reason for a current builder or homeowner to abandon their project. Along with the plans and permits, find a home inspector who has a reputation for thoroughness and attention to detail. This is not a time where you need someone to gloss over problems you will regret down the road.

4. Be Prepared for Harder Financing

Many banks are hesitant to offer full financing for an unfinished home. The value of the property is diminished and they are at a greater risk during a resale should you default on the mortgage.

Without a substantial down payment, most first time home buyers will be unable to obtain financing for both the sale price and the building costs of an unfinished home.

Even seasoned homeowners with good credit will need to provide full building plans, a schedule of completion, estimated budget, and evidence of permits along with their mortgage application.

Buying an unfinished home can be a great opportunity to build your dream house with your own personal signature. However, you should enter the entire process with your eyes open and wallet closed until you have a clear understanding of what you are stepping into.

You need to be savvy about the legal and pragmatic details, from building permits to difficult mortgage applications. This way, you protect yourself from costly errors while still acquiring and completing your dream home.